Settled in at Sysco, FreshPoint dives into deals

(April 4) Within a few years, FreshPoint Inc. hopes to be able to count 2 billion positive reasons for joining the Sysco corporate network.

It’s all about earnings.

FreshPoint, which has been in a buying frame of mind of late, thinks it can reach $2 billion in annual sales by 2010.

And FreshPoint is making that case now, said Brian Sturgeon, the company’s president and chief executive officer.

The reason? The foodservice supplier, Sturgeon says, is allowed to pursue its own business goals, under its own business model, all while operating under the significant influence and protection of parent company Sysco Corp., the Houston-based broadline foodservice distributor.

FreshPoint has learned a few things from Sysco, Sturgeon says. One of the lessons is how to expand.

FreshPoint, which Sysco purchased in 2000 for an undisclosed sum, moved its base from Dallas to Houston but was not treated as an unwanted stepchild.

“By combining their purchasing power with ours, we will be able to offer customers a breadth of specialty products that previously was unavailable through our broadline distribution companies,” Thomas Lankford, now retired executive vice president of Sysco’s merchandising services and multiunit sales, said in a news release at the time of the purchase.

That’s what FreshPoint brought to Sysco.

FreshPoint, at the time, was a 28-unit company posting about $750 million in annual sales, according to Sysco.

Sturgeon said FreshPoint’s annual revenues were closer to $500 million after subtracting sales from FreshPoint affiliates that turned exclusively to broadline operations when they joined Sysco.

Now, two years into a growth spurt, FreshPoint has 32 branches and is on pace to earn $1.2 billion in sales this year, Sturgeon said.

“We’ve doubled in size in the last three years,” he said.

It’s a growth plan that was carefully crafted, he said.

“We weren’t making that many acquisitions early on,” Sturgeon said. “After we got bought by Sysco, for the first couple of years, we had to pretty much get assimilated and figure out how we fit into that organization. Then … about two years ago, Sysco gave us the green light to expand FreshPoint. Then, in the last two years, we made acquisitions.”

And how.

The company just finished adding four established companies to its network.

In late February, FreshPoint completed a twin purchase of Austin, Texas-based City Produce, which has operations in Austin, Corpus Christi, San Antonio and Harlingen, Texas; and Oklahoma City-based Thomas Bros. Produce Inc.

Acquiring established companies that are dominant in their markets has been central to FreshPoint’s plan, Sturgeon said.

It’s also very much in line with the philosophy Sysco had when it bought up FreshPoint, he said.

FreshPoint targets companies for acquisition that dominate their particular markets, Sturgeon said, but those companies don’t necessarily have to be behemoths.

“Our real target is not to buy real small companies, but if it has strategic value, we will,” he said.

He cited the Incredible Fresh purchase as an example.

“It wasn’t a large company, so if I was going strictly off an annual sales number it wouldn’t have made the list. But strategically, we were servicing customers in that market out of Miami and Tampa. By buying that company, we’re opening up a brand new warehouse in two months. We’re moving business from my Tampa and my Miami locations to that facility, so that company will double in size and be better servicing the customers there locally,” he said March 9.

The Incredible Fresh deal also made FreshPoint the largest produce distributor in South Florida, with $150 million in annual sales.

“So there are strategic reasons why you might buy a smaller company,” Sturgeon said. “But there’s a lot of produce companies out there between $25 million and $40 million, and generally when we go into a market we’d be looking for a company that’s dominant in the market and depending on the market it could be $90 million or $40 million, or $25 million.”

The typical FreshPoint house registers about $50 million in sales per year, Sturgeon said.